The sharp rise in precious metal prices has attracted global attention, while the price of copper, which has both industrial and financial attributes, has performed notably. Recently, the three-month copper on the LME and the Cu2512 contract on the Shanghai Futures Exchange have both reached historical highs, and the COMEX copper price also hit a historical peak on July 24th.

Disruptions in upstream raw material prices have directly impacted the production processes in the mid and downstream. Securities Times journalists have learned that many copper smelters are currently facing the dilemma of depleting raw material inventories, leading to continuous production cuts. Industry analysts believe that in the medium to long term, with the growth in electricity demand for computing power brought about by AI not yet replaced by other means, copper prices are likely to rise rather than fall. As the transformation and upgrading of the industry accelerates, the expansion of inefficient capacity is limited, and the industry shake-up will intensify.

Downstream cost pressures highlighted

"Rising copper raw material costs have significantly suppressed the downstream industry chain. At present, the production reduction rate of small and medium-sized enterprises in the downstream of the copper industry chain in China has reached 18%, directly restricting the smoothness of the industrial cycle." At the second Shanxi Copper-Based New Material Industry Chain Development Conference held recently, Wei Yinghui, Party Secretary and Chairman of Zhongtiao Mountain Group and Northern Copper Industry, stated publicly that although domestic copper smelting production continues to grow, most smelters are facing the dilemma of raw material stockpiles being exhausted, and the impact of the decline in the price of by-product sulfuric acid has increased the operating pressure of smelters. The continuous cost pressure has accelerated the process of copper-aluminum substitution. In many application fields, such as cables and heat sinks, the cost advantage of aluminum is increasingly prominent, and in the long run, it may weaken the demand base for copper.

As the largest modern copper enterprise in North China, the industry dilemma mentioned by Zhongtiaoshan Group is the reality brought about by the high copper prices in recent years.

"Over the past two years, the overall trend of copper prices at home and abroad has shown a strong upward momentum, reaching historical highs and with relatively violent fluctuations. Faced with the sharp rise in copper prices, the upstream, midstream and downstream industries in the industry chain have been affected to varying degrees. Overseas mines have enjoyed most of the profits brought by the rise in copper prices, such as Glencore, Freeport-McMoRan, Codelco and Rio Tinto. In the smelting link, although copper smelting enterprises with copper mine resources, such as Jiangxi Copper Industry, Zijin Mining, Western Mining, China Five Mines and Jinxu Shares, have been less affected, most copper enterprises with a high proportion of copper from outside the mine have been more affected." said Cheng Xiaoyong, assistant general manager of Huan Wen Futures Co., Ltd.

Regarding the current high copper prices and their impact on the upstream and downstream industries of the supply chain, Cheng Xiaoyong stated that in recent years, the processing fees for copper mines have continued to decline. Among them, the long-term contract processing fees reported by overseas mines to Chinese copper smelting factories dropped to about 25 US dollars/ton in 2025, while the processing fees for spot imported copper concentrate fell into negative territory. In the field of copper processing industry, the current refined copper rod enterprises are facing a pattern of pressure on both ends. On the one hand, the high price of refined copper and rising costs are on the rise, and on the other hand, the processing fees are difficult to improve due to insufficient traditional demand. However, for recycled copper rod enterprises, due to the expansion of the price difference between refined copper and waste copper, the price transmission of waste copper is slower, and the downstream's willingness to purchase recycled copper rods is higher, with better profits than refined copper rods. However, due to the rapid growth of demand for copper foil brought about by the high-speed growth of new energy batteries, the current demand for copper foil is relatively strong compared to traditional copper products such as copper rods and copper tubes.

For downstream enterprises, the current copper, household appliances and other traditional copper-consuming enterprises are also facing significant cost pressures, coupled with the large sales pressure at the downstream level, the profit of enterprises is facing a decline. At the same time, for enterprises in the new energy vehicle, battery, photovoltaic and other fields, the impact of the price war and the rise in copper prices have also brought significant cost pressures.

Shanghai Steel Network copper industry analyst Xiao Chuan-kang also said that the operational risks in the current copper industry chain are increasing. The high volatility of the copper market has a significant impact on its trading pricing, and the default risk in the high-volatility market has intensified, leading to a decline in downstream production and operation profits, especially in the copper processing link.

"In the past, the inventory cycle for copper raw materials in downstream enterprises has been about one quarter, but facing the current market with rapid and intense price fluctuations, some enterprises have insufficient inventory reserves for even one month, and even prefer to temporarily shut down and observe rather than produce." he pointed out.

Supply and demand dynamics shift

In the eyes of practitioners in the copper industry, the current international copper price continues to reach new historical highs, the focus of operation continues to move up, and the reasons behind the relatively violent price fluctuations, in addition to the supply and demand relationship, copper as a highly financialized commodity is also affected by exchange rates, geopolitical and other multiple factors.

"In recent years, the supply side of copper mines has been continuously disturbed, and the expected growth in copper demand from new energy and AI computing power has pushed the market price up." Cheng Xiaoyong introduced that on the demand side, the growth of copper consumption from traditional electricity, real estate, and infrastructure has been sluggish, while new energy vehicles (including lithium batteries, etc.), photovoltaic, and wind power have brought about growth in demand.

In addition, the Trump administration's tariffs have also led to abnormal trade in copper, with the implementation of tariffs in April triggering a large-scale transfer of copper to New York, USA, where the premium of copper in New York over the LME three-month copper reached more than $2,000.

Song Hongxiao, a copper analyst at Fubao Copper of Zhongtian Information, believes that the core contradiction in the current copper market is the persistent tight supply.

"Global copper mine supply growth has only increased by 1.6%, far below the expansion rate of refining capacity. From 2024 to 2026, China and the DRC added nearly 3 million tons of new refining capacity, while the supply of ore has grown slowly, leading to the processing fee for copper concentrate falling to a historical low of -44.5美元/kt in 2025, causing refining plants to incur losses and reduce production. The demand side has shown resilience, with copper demand in the new energy sector (new energy vehicles, data centers) growing by more than 700,000 tons per year, offsetting the weakness in traditional sectors such as construction and manufacturing," he said.

On the macro policy front, the performance of the US dollar and changes in interest rates also directly impact copper prices. Loose expectations support prices, while tightening policies create pressure. The market's expectation of rate cuts in 2025 has become an important driving force for fluctuations in copper prices. In a high-inflation environment, copper, as an inflation-resistant asset, is sought after, but once interest rates rise, it will suppress demand, forming a multifaceted impact on copper prices.

High prices may continue

Based on the new application space in the new energy and AI computing power infrastructure, copper is called the "new oil" in the AI era, and the market demand and supply are facing a new pattern.

"The AI sector, as a market hotspot, its supporting products such as data center construction, the market generally believes that it can bring incremental demand for copper. Although the copper price continues the trend of high fluctuation in the short term, the market's bullish sentiment is still high," Xiao Chuan-kang said in an interview with the Securities Times. In the current market environment where expectations are relatively consistent, it is necessary to pay attention to and guard against the price adjustment brought about by the profit-taking and exit of some bulls in advance. However, in the medium and long term, we still continue to be optimistic about the copper price, and the development of green power and new energy is the main factor.

Song Hongxiao predicts that the supply and demand pattern of the copper market in the future will show the characteristics of short-term tight balance and structural shortage in the medium and long term. The supply side is growing slowly due to mine disruptions, smelting losses and insufficient capital expenditure, and the supply is marginally tight. In addition, the domestic re-started electrolytic copper capacity is limited, so the supply constraint will be reflected in the mine and smelting side. On the demand side, the strong pull of AI data centers, energy transition and power grid investment is expected to turn into a shortage of at least 100,000 tons in 2026 after a slight surplus of refined copper in 2025. The short-term copper price may maintain a high-level fluctuation pattern, but there is a risk of a stage-by-stage adjustment due to the suppression of demand by high prices and macro uncertainties. In the medium and long term, the copper price center moves up, and it is expected to break through the 90,000 RMB/ton barrier in 2026 driven by the expansion of the supply and demand gap and the low inventory, and the bull market logic remains unchanged.

Cheng Xiaoyong said that before other means replace the increased demand for computing power and electricity brought by AI, it is difficult to refute the supply gap of copper, and the copper price is likely to rise rather than fall. At the same time, after China's economy enters a new stage of high-quality development, the original development model of the non-ferrous metal industry, which relies on large-scale capacity expansion, low prices and low-level competition, will be difficult to continue.

The recent release of the "Work Program for Stabilizing Growth in the Non-Ferrous Metals Industry" signifies that the non-ferrous metals industry is moving from " quantitative growth" to "qualitative improvement," achieving a high-quality supply of goods. In terms of improving quality and efficiency, the non-ferrous metals industry will focus on enhancing resource security through efficient utilization, increasing the level of high-end supply through technological innovation, and leading the creation of new demand through high-quality supply. As the transformation and upgrading of the copper industry accelerates, the demand for high-end manufacturing and emerging industries will drive the industry's stable development, while the expansion of inefficient capacity is limited. Products will compete based on quality and effectiveness, and the industry's reshuffle will intensify," said Cheng Xiaoyong.

He said that there are three ways for downstream and midstream enterprises to deal with the cost pressure brought by the rise in copper prices. The first is to optimize management and reduce costs and improve efficiency. The second is to study processes such as "aluminum instead of copper" and to reduce the cost of raw material use through technological improvements and process optimizations. The third is to hedge the cost pressure brought by the rise in copper prices through futures and options derivatives. As of the end of August 2025, the participation rate of A-share listed industrial companies in risk management was 29.9%, of which the participation rate of enterprises related to non-ferrous metals had exceeded 90%.

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